THE Florens Group plans to raise HK$734.4 million before expenses through a new share issue and placement of 255 million shares, representing 25 per cent of its enlarged issued share capital. The company, a subsidiary of the China Ocean Shipping (Group) Co (COSCO), is also issuing a US$20 million fixed-rate (seven per cent) convertible bond, of which $2.5 million has been snapped up by Hutchison Whampoa. The shares will be offered at HK$2.88 each, representing a fully diluted prospective price-earnings multiple of 8.95 times and a weighted average prospective price-earnings ratio of 7.47 times. About 66 per cent of the share issue, or 168.19 million shares, have already been placed with institutional and professional investors. That part of the issue was four times subscribed, indicating that China play stocks remain popular with the big investors. The offer to the public for the remaining 86.8 million shares closes at noon on Friday. Trading in the shares is scheduled to begin on December 19, making it the first container leasing company to be listed on the stock exchange. Of the net proceeds of HK$705 million, $450 million will be used to buy 20,000 new containers. About $120 million will be invested in container-related joint ventures, such as container storage facilities, container ports and container handling equipment. About $85 million will be used to repay bank borrowings and the remainder will be used as working capital. With the new shares, the company's market capitalisation will amount to almost HK$2.94 billion, with an adjusted net tangible asset value per share of $1.69. Florens has forecast combined profits after tax and minority interest, but before extraordinary items, of HK$300 million for the year to December 31. Forecast earnings per share are 38.57 cents on a weighted average and 32.17 cents on a pro forma fully diluted basis. With a forecast final dividend per share of two cents, the prospective dividend yield will be six per cent. Managing director Luk Chiwing said the company would further expand its container portfolio to meet increasing demand for container leasing because of the rapid economic growth and escalating international trade with China. 'We will also capitalise on COSCO's leading position in the shipping industry and the substantial business we derive [from the company],' Mr Luk said. More than 56 per cent of the containers used by COSCO are leased from Florens. That represents about 94 per cent of Florens' total container fleet in terms of 20-foot equivalent units (TEUs). The company, which started business in 1987 with 4,000 dry freight containers, now has a fleet of 260,000 TEUs, making it the sixth-largest container leasing company in the world. Mr Luk said the substantial COSCO business had helped Florens maintain a 100 per cent utilisation rate for its containers, compared with a world average of about 85 per cent. To cope with the anticipated strong demand, Florens plans to buy about 25,000 to 30,000 TEUs per annum in coming years. In the past, COSCO leased containers from Florens at higher than market rates to support the group's expansion. But Mr Luk said even assuming that all Florens' rental income had been charted at previous average market rates, it still enjoyed a 16.3 per cent average compound growth in turnover between 1991 and last year. On that basis, the average compound growth in profit was 41.8 per cent over the three years. After the listing, all containers leased to COSCO will be charged at market rates negotiated at arm's length.